Category: Finance

It takes a highly competent and experienced attorney to properly handle Bankruptcy Law cases. Whether you are a creditor, a business, or an individual seeking bankruptcy relief, improperly handled cases can cost you thousands of dollars and have significant impacts on your future. When bankruptcy cases become complex due to issues involving personal financial assets and liabilities and/or business assets and liabilities you want and need the support of an experienced attorney who can assist you through the all of the processes and, when needed, call upon experts to support your case. You want a bankruptcy lawyer who knows Federal Bankruptcy Law, is your strongest advocate, and will represent all of your interests!

Bankruptcy

Bankruptcy is the legally declared inability of an individual or an organization to pay their creditors. Creditors may file a bankruptcy petition against a debtor in an effort to recoup a portion of what they are owed. In the majority of cases, however, bankruptcy is initiated by the debtor.

The primary purposes of bankruptcy are to give an honest debtor, whether it be an individual or a business entity, a “fresh start” in life by relieving the debtor of most debts, and to repay creditors in an orderly manner to the extent that the debtor has the means available for payment. As such, bankruptcy allows debtors to be relieved from the legal obligation to pay most debts by submitting their non-exempt assets, if any, to the jurisdiction of the bankruptcy court for eventual distribution among their creditors. From the time a Bankruptcy Petition is filed until its conclusion, the debtor is protected from most non-bankruptcy legal action by creditors through a legally imposed stay. Creditors cannot garnish wages, pursue related lawsuits, or attempt to compel payment.

Federal Bankruptcy Law encompasses a great many areas and the legal strategy and results are highly dependent on a particular case’s or client’s circumstances. Your bankruptcy lawyer, can assist you in addressing all of the legal matters related to Bankruptcy Law.

Creditors’ Rights

When creditors get a bankruptcy notice, they assume they have neither rights nor alternatives with respect to their claims against the debtor. This is not necessarily so. Creditors in bankruptcy are entitled to share in any distribution from the bankruptcy estate according to whether the claim is secured by collateral or the priority of their unsecured claim as well as be heard by the court in matters concerning the debtor’s plan, the liquidation of the debtor’s non exempt assets, and payments from the assets of the estate. Creditors may also challenge an individual debtor’s right to a discharge or to discharge the creditor’s particular debt. If you have a valid lien that has been perfected by filing with either the Secretary of State or County Clerk, federal law protects the value of your lien and prevents the party in bankruptcy from harming the value of your collateral.

As with many things related to the Law, time is of the essence. As a creditor, if you know about the bankruptcy case, even informally, you must act to preserve your rights. Most courts hold that if you have actual knowledge of the case, however obtained, you are bound by the filing deadlines for objections to dischargeability and for filing claims. As soon as you learn about a bankruptcy affecting you, for guidance and representation, you should contact a quality Bankruptcy Attorney in Albuquerque to learn about your Creditors’ Rights.

Creditor Harassment

Bankruptcy lawyers assist clients in preventing harassment from creditors at home and at work. We help debtors understand the law and provide them with the tools and means to demand and insure their legal rights are being honored.

You don’t have to be in bankruptcy to insure that debt collectors treat you fairly. Whether or not you are currently in bankruptcy, the Fair Debt Collection Practices Act requires that debt collectors not only treat you fairly but it prohibits certain methods of debt collection. Personal, family and household debts are all covered under this act. However, business loans are not covered by this law.

Most creditors and collection agencies follow the law when attempting to collect a debt. But some don’t, and many times, an abusive creditor is the reason why debtors may feel forced to file for bankruptcy protection—to get the creditor to stop harassing them. You should never allow an abusive bill collector to force you into bankruptcy. However, if your circumstances prevent you from any other action, you still do have legal rights. Once you file for bankruptcy protection, creditors are formally notified you are in bankruptcy, and collection attempts must immediately cease until your case has been discharged or has otherwise decided upon by the courts.

IRS Collections

It is a common misconception that IRS tax obligations can never be discharged in a bankruptcy. It is true that if there is tax fraud involved, a tax return was not filed, or the tax was not listed as a liability in the bankruptcy filing, then the tax cannot be discharged in bankruptcy. However, if there was no tax fraud involved and the tax return was filed then there is a point in time when IRS tax can be discharged in bankruptcy and when the IRS can no longer commence tax collection proceedings. The rules are extremely complex, but generally, taxes that are older than three years and with regard to which tax returns were timely filed can be discharged, so long as no tax lien has been filed. When you are going through a bankruptcy your bankruptcy lawyer should advise you that the IRS must cease collection action after a bankruptcy! However, you must notify the IRS in writing. Through a Chapter 11 or Chapter 13 plan, complex tax situation can sometimes be handled by paying the recent, or “priority,” taxes as well as the value of the property security the tax lien while discharging, that is eliminating, other taxes.

A bankruptcy attorney should fully inform all of his or her clients on all of the legal and financial ramifications of their bankruptcy case – especially all of the tax issues (Federal and New Mexico) involved. IRS issues are an important example as to why it is vital that you discuss all bankruptcy issues with a trusted bankruptcy lawyer before you file for bankruptcy. If not properly orchestrated, even with bankruptcy protection, you could still be left with substantial debt that could have been cleared.

Foreclosure & Bankruptcy

If a person gets behind on his or her house payments, the creditor may call the loan in default, accelerate the debt, and begin foreclosure proceedings. When a debt is accelerated, the full balance of the note, not just the monthly payments, is due, in full, immediately. This is usually preceded by the creditor’s refusal to accept further monthly payments.

In the event a creditor begins foreclosure, you will receive a notice of the foreclosure proceeding. Unless the creditor is willing to accept payments to reinstate the loan, you will have to either pay the full balance remaining on the loan, give up your home, or file bankruptcy for protection to stop the foreclosure. However, stopping a foreclosure through the use of bankruptcy is a serious decision and should only be arrived at after receiving very good legal and financial advice.

If bankruptcy seems to be the best option, your bankruptcy attorney will discuss with you the three bankruptcy options open to you: a Chapter 7 straight bankruptcy, a Chapter 11 reorganization, or a Chapter 13 or “wage earner” repayment bankruptcy or a Under a Chapter 13 plan, it is possible to make up the missed payments out of your income through a Chapter 11 reorganization or through the Chapter 13 repayment plan.

If you face foreclosure, bankruptcy may or may not make sense, depending on your other obligations and income sources, and the advice of a bankruptcy attorney can be very helpful. If you are in these circumstances, please contact a bankruptcy attorney to discuss your bankruptcy foreclosure options.

Chapter 7

Of the three common forms of bankruptcy (Chapter 7, Chapter 11 and Chapter 13) Chapter 7 bankruptcy, sometimes call a straight bankruptcy is a liquidation proceeding. The debtor turns over all non-exempt property to the bankruptcy trustee who then converts it to cash for distribution to the creditors. However, the exemptions tend to cover all of the property that most ordinary individuals own. The debtor receives a discharge of all dischargeable debts usually within four months. In the vast majority of cases the debtor has no assets that he would lose so Chapter 7 will give that person a relatively quick “fresh start”. Although Congress changed the law in 2005 to make it more difficult for high earning people to file Chapter 7 bankruptcy, the new law actually affects only a small percentage of people with serious financial difficulty.

One of the main purposes of Bankruptcy Law is to give a person, who is hopelessly burdened with debt, a fresh start by wiping out his or her debts.

The process of making choices from among the various forms of bankruptcy are best decided by the client who is supported by good legal and financial advice. Your bankruptcy lawyer should bring the sound legal bankruptcy advice to the table and he or she will help by working with financial experts to create the proper team for his clients.

Chapter 13 (Reorganization Bankruptcy)

Of the three common forms of bankruptcy (Chapter 7, Chapter 11 and Chapter 13) Chapter 13 Bankruptcy is also known as a reorganization bankruptcy. Chapter 13 bankruptcy is filed by individuals who want to pay toward their debts over a period of three to five years. This type of bankruptcy is often appropriate to individuals who have non-exempt property that they want to keep. It is also only an option for individuals who have predictable income and whose income is sufficient to pay their reasonable expenses with some amount left over to pay off their debts.

The process of making choices from among the various forms of bankruptcy are best decided by the client who is supported by good legal and financial advice.

Chapter 11 (Reorganization)

Of the three common forms of bankruptcy (Chapter 7, Chapter 11 and Chapter 13) Chapter 11 Bankruptcy focuses on Business Reorganization and bankruptcy, although it can be an effective remedy for high earning individuals. Most business people assume bankruptcy means liquidating all a debtor’s nonexempt assets and distributing the proceeds among creditors. But the bankruptcy laws also provide for rehabilitating the debtor. Chapter 11 (business reorganization) allows a debtor to enter into an agreement with creditors under which all or a part of the business continues. The debts of the business are restructured so as to allow the debtor to continue business operation.

In general, any individual, partnership, corporation, or limited liability entity except a governmental unit may be a debtor in a Chapter 11 case. The objective in a Chapter 11 case is to adjust and reorganize a debtor’s obligations so as to allow the business to continue. In most cases, the debtor, known as the debtor in possession once the case has begun, remains in possession of his or her property, develops a plan, and generates funds to pay debts. If there is evidence of mismanagement or fraud, a trustee may be appointed upon the request of creditors.

Prior to the Congressional changes in the law in 2005, someone who had a high income but who had also incurred high amounts of debt, could often file for Chapter 7. Congress now requires that some people either file for Chapter 11 or Chapter 13 if they have higher earnings. Chapter 11 may provide a more effective and flexible remedy than Chapter 13, as no Trustee is automatically appointed, and the case does not have to last as long as a Chapter 13 if the creditors accept the plan. Although the initial costs of filing for Chapter 11 are higher than a Chapter 13, in the long term the costs are similar and the greater flexibility makes it more attractive to some individuals.

Financially troubled businesses, large and small, can benefit from properly orchestrated and filed Chapter 11 Bankruptcies, as can some individuals with relatively high incomes. Proper legal guidance by licensed bankruptcy attorney supported with qualified financial advisers can allow these troubled businesses to recover and prosper.

Most bankruptcy filers go through a period of non-payment before recognizing they cannot get out from under their crushing debts on their own. If you are at the beginning of the non-payment stage and have so far only received dunning letters and calls, here is what may follow:

1. Rent. You will be evicted if you do not pay your rent, so this should be a high-priority debt. In addition, tenant-screening agencies collect eviction information from court records and report it to subscribing landlords. Being evicted will make it more difficult for you to rent another place.

2. Car payment. Most auto lenders will move quickly to repossess your car if you miss more than one payment. Hiding your car from the repossession service is difficult when you are regularly driving it. The lender will resell the car at auction, which often will not bring in enough to fully offset your outstanding balance. You remain responsible for the difference, which is called the deficiency balance. It will likely be turned over to a collection agency, who you will hear from shortly. And you no longer have a car to drive.

3. Unsecured property. If you owe several thousand dollars or more, an unpaid creditor may decide it is worth suing you for the unpaid balance. Upon obtaining a judgment, the credit will seek to garnish 25% of your wages if you have a job, seize your bank account, or lien any real estate you own. If you have foolishly kept money in a bank to which you owe money, the bank may simply remove the money it is owed from your account.

4. Student loan. If you are in default on student loan payments, the collecting agency can have the IRS intercept any federal income tax refund you are owed. The IRS will notify you beforehand, so you will have a chance to argue the intercept is inappropriate.

5. Utilities. Unpaid utilities will quickly result in a cutoff of services. And you will not be able to reinstate those services until the unpaid sum has been cleared.

You will usually be better off filing bankruptcy before any of the above steps are taken. Contact a local bankruptcy lawyer if you want to discuss your personal situation and learn whether bankruptcy is recommended for you.

The means test for Chapter 7 is the last of the bankruptcy documents, but should be considered first.

The means test determines whether you are eligible for Chapter 7, which is the type of bankruptcy that most debtors prefer to file. Chapter 7 is fast, straightforward, and eliminates most of your debt. If you are not eligible for Chapter 7, you must file under Chapter 13, where you will make partial payments on your debts for 3 to 5 years.

Chapter 7’s means test does not apply if you are a disabled veteran or if more than 50% of your outstanding debts are business debts. In either case, you are automatically eligible to file under Chapter 7.

In a nutshell, the means test assesses whether your household income over the last six calendar months exceeds median income for a household the size of yours.

Household size is essentially determined by “heads on beds,” or how many relatives live under your roof. However, if any of those relatives earns an income, that income must be added to yours to determine your household income.

The means test allows adjustment for expenses, so can be complicated. If you want help assessing whether you are eligible to file under Chapter 7, be sure to contact a bankruptcy attorney in your state. NACBA is a good place to start if you’re looking for a bankruptcy attorney.